NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives
An investor buys one lot of a stock futures contract at ₹500 per share. The lot size is 400 shares. At expiry the stock settles at ₹520. What is the profit or loss on the position, ignoring costs?
The buyer of the futures gains ₹20 per share because the price rose from ₹500 to ₹520. Multiplying by the lot size of 400 shares gives a profit of ₹8,000, since a long futures position profits when the underlying price increases.
- AProfit of ₹8,000Correct
- BLoss of ₹8,000
- CProfit of ₹20,000
- DLoss of ₹20,000
Explanation
A long futures position gains when the price rises. Gain per share = 520 - 500 = ₹20. Total = 20 x 400 = ₹8,000 profit. A loss would apply only to a short position, and ₹20,000 ignores the lot size multiplication correctly (it is 20 x 1,000).
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